WASHINGTON, D.C. – U.S. Senator Amy Klobuchar announced today that legislation she cosponsored to level the playing field for Minnesota businesses to compete against online retailers passed the Senate by a vote of 69 to 27. The Marketplace Fairness Act  gives states the option to require out-of-state businesses, including online retailers, to collect sales taxes that they are already owed.

“From small businesses like the Uffda Shop in Red Wing to Mary’s Morsels in Eveleth, our businesses on main street need a level playing field to compete against online retailers,” said Klobuchar.  “Unfortunately, too many Minnesota businesses are put at a disadvantage because of a loophole in our tax code. Today’s action marks an important step in helping to ensure that all businesses are playing by the same rules.”

Under current law, states cannot require out-of-state or online-only Internet retailers without a physical presence in the buyer’s state to collect the sales tax owed by state residents and businesses. Estimates put this lost tax revenue at roughly $23 billion in 2012. Minnesota lost about $394 million in 2011 from e-commerce and remote sales upon which tax is legally due but not collected.  This lost revenue translates into over 7 percent of Minnesota's general sales tax liability in 2011.

The bipartisan Marketplace Fairness Act would give states the authority to require out-of-state businesses, including online retailers, to collect sales taxes if a state meets certain requirements, including an easily identifiable tax rate, uniform tax-base rules, and centralized filing and remittance of the sales taxes withheld.

The legislation would provide two options by which states could begin collecting sales taxes from online and catalog purchases. The legislation exempts small businesses that make less than $1,000,000 in total remote sales in the year preceding the sale.